Had Cosmopolitan Housing Group gone into insolvency in 2012 it would have had a significant impact on the social housing sector. Tenants could have lost the protection provided from being part of a regulated sector. A large number of much-needed homes could have been lost. The jobs of many who worked for the group and its subsidiaries in the north west of England would have been at risk. The lenders could have suffered significant losses and this could have had further ramifications on the advantageous cost of borrowing that benefits the whole sector.

Cosmopolitan Housing Group was rescued from the brink by Sanctuary Group in 2013. The near-failing was a result of weak governance and management and an over-ambitious development programme which overstretched the group's finances.

An independent report I authored examined how the crisis was handled and highlights lessons learned for both the sector and the regulator.

Lessons to learn

The regulator (the Homes and Communities Agency) and those involved in the rescue acted swiftly with the sole focus of protecting social housing assets. However, had routine regulation in the early 2000s been more effective, the crisis may have been prevented.

The lessons learned for the sector and regulator focus on five themes: skills and resources, information requirements, risk management, mergers, and how housing providers and the regulator should act in a crisis. The report also suggests that the government reviews the relevant legislation to ensure that the regulator is not hampered if this situation were to unfold in the future.

The recommendations include: boards should have the right people with the skills and experience to govern well, that the risk the organisation faces is fully understood, and that decisions take account of how this will impact the overall risk profile of the business now and in the future. When organisations merge, the board needs to be in control of the process as well as understanding the output of due diligence and ensuring that the newly merged organisation focuses on all activities, specifically areas of higher risk.

The regulator needs to have the resources and skills available to regulate the sector in the changing environment –and should keeps those skills updated. It should monitor the implementation of the new regulatory framework, specifically the requirement for all organisations to keep a record of their assets and liabilities, and undertake scenario-testing to inform their ability to respond to crises.

The regulator has accepted the report in full and has been strengthening its regulatory capacity through an increase in senior staff resources. It has also been consulting on changes to the regulatory framework to reflect changes to the environment and risk profile of the sector.

This was a near-miss for the social housing sector that was avoided thanks to the sheer hard work of those who brought Cosmopolitan back from the brink of a crisis. The important thing now is for everyone in the sector to take note and act on the recommendations in the report, so we can reduce the risk of another near collapse in the future.

Dr Fiona Underwood is a partner at Altair and the author of an independent review into the lessons learned from the near collapse of Cosmopolitan Housing Group. The report can be downloaded from the Altair website.